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  1. #1
    Specialist Member marc's Avatar

    Please help with Fibonacci !!!

    Is there a clear rule of how to use the Fibonacci tool? ... so far the use seems very subjective to me, or I simply use it the wrong way ...

    So, if you use it, please tell me ...

    - from which point to where do you draw your line?
    - do you always draw it in the same direction?
    - do draw it to the open/close or do you include the wicks?
    - which levels are the most important for you to look for a rebounce/break?
    - do you use it for every single wave/swing? ... or just on the biggest wave?
    - when do you draw a new/another Fibonacci line?

    I hope some of you veterans can shed a light on this ... many thanks in advance!

  2. #2
    Specialist Member LesterK's Avatar
    Hi mark,

    When I am drawing Fibonacci retracements I include also the wicks of the bars. For me the best indication for possible reverse of the corrective move and the place where I could buy a put option is the 38.2% retracement. Sometimes when the corrective move is too strong 50% will work too, but it is more risky than 38%. To draw a clear Fibonacci retracement you need a clear trend – up or down and when it has a confirmation on the price action level that the trend is finished only then you place the fibo retracement tool. I hope this will explain something. If you have other questions ask them!

  3. #3
    Legendry Member Michael Hodges's Avatar
    Lester is right. It takes a clear trend to use a Fibonacci.

    You also need to understand who Fibonacci was and what his ratios mean. His ratios are a measure of the natural order found everywhere in nature. The relationship between the numbers in a Fib. sequence are identical to ratios in things like your height versus your armspan, the width of a tree's canopy to it's height or the spacing of its branches. It is uncanny how these ratio's can be found literally everywhere in nature, and I'm not exagerating, there are entire fields of science based on Fibonacci. When applied to a financial market Fibonacci retracements provide POTENTIAL areas of support and resistance based on the height or depth of a rally or bear market, respectively. These are not guranteed areas, but areas where price action is likely to face support/resistance. I have found that a good way to use Fib's is to use them to CONFIRM other support/resistance lines I have drawn. These may connect tops, bottoms, congestion band etc. When one of my lines converges with a Fib line it carries more weight than one of my lines alone.

    As for what direction to expect, that comes down to other analysis. As for which line to trade on, there are a list of rules for each level. However, one rule is that if an asset begins to retrace and breaks the first level, it will likely reach the next level, if it breaches that level, it will likely reach the next level. If price retraces and does not breach the first level then the trend is likely to continue.

    Remember, Fibonacci's are a tool for measuring the market. They can confirm support/resistance, project targets and provide entry points. Be careful though, there are a lot of ways to use Fibs and it is easy to get them confused together.

  4. #4
    Specialist Member marc's Avatar
    Many thanks Lester and Michael for the detailed explanations ... some more questions though:

    ....B
    ..........C
    A

    So, if I have a pattern like the 'drawing' above, I would draw the Fibonacci between points A-B to see, if the price bounces/breaks at point C, given that point C matches with a Fibonacci line, correct? And sure it does matter in which direction I draw, or not? Because there will be a difference in the levels AB or BA, right?

  5. #5
    Rookie Member nelica77's Avatar
    Yes I think you are right. If point A is first and B second extreme, than you will paste a Fibo from A to B and check if C is on a corrective level. The Fibo drawing start always from the first extreme i.e. A and goes to the next one.

  6. #6
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by nelica77 View Post
    Yes I think you are right. If point A is first and B second extreme, than you will paste a Fibo from A to B and check if C is on a corrective level. The Fibo drawing start always from the first extreme i.e. A and goes to the next one.
    Yes, start your line at the bottom of the lower wick of the FIRST candle in a recongnized up trend and end it at the top of the upper shadow of the LAST candle of the trend. The same is true in reverse for a downtrend. The tool works well, it just takes a little time to get the hang of using it profitably.

  7. #7
    Master Member Bogdan G's Avatar
    Quote Originally Posted by marc View Post
    Is there a clear rule of how to use the Fibonacci tool? ... so far the use seems very subjective to me, or I simply use it the wrong way ...

    So, if you use it, please tell me ...

    - from which point to where do you draw your line?
    - do you always draw it in the same direction?
    - do draw it to the open/close or do you include the wicks?
    - which levels are the most important for you to look for a rebounce/break?
    - do you use it for every single wave/swing? ... or just on the biggest wave?
    - when do you draw a new/another Fibonacci line?

    I hope some of you veterans can shed a light on this ... many thanks in advance!
    Hi marc, maybe some of the Qs have been answered already but here goes:

    - from which point to where do you draw your line? - From the highest towards the lowest or vice versa depending on trend of course
    - do you always draw it in the same direction? - Always from Left to Right
    - do draw it to the open/close or do you include the wicks? - Wicks too.
    - which levels are the most important for you to look for a rebounce/break? - 38, 50 and 61 but I consider the strongest level to be the one that coincides with a confirmed S/R level
    - do you use it for every single wave/swing? ... or just on the biggest wave? - The more clear the wave, the more reliable the levels
    - when do you draw a new/another Fibonacci line? When I have confirmed Top or Bottom and thus, a new wave.

    Hope it helps.

  8. #8
    Master Member Bogdan G's Avatar
    Maybe the article linked below will offer you more insights about Fibs:
    http://www.binaryoptionsthatsuck.com...or-not-to-use/

    All the best

  9. #9
    Specialist Member marc's Avatar
    Many thanks to all of you for the detailed explanations ... and yes Bogdan, I have already read your good article before ... the reason for my confusion is that I came across an article on another site:

    http://www.binaryoptions.net/3-binar...for-beginners/

    Maybe my Eglish is simply too bad to get this strategy in detail ... but I think, that the provided screenshots don't match the explanation, or am I wrong here? Anyway, I would be glad to hear your opinion about that strategy ...

  10. #10
    Master Member Bogdan G's Avatar
    I just read that strategy in a hurry and, let me tell you, it's really confusing. Either that or it's too early for me and my coffee is not working.

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